Citation Nr: 0532721
Decision Date: 12/05/05 Archive Date: 12/21/05
DOCKET NO. 02-09 803 ) DATE
)
)
On appeal from the
Department of Veterans Affairs Regional Office in Houston,
Texas
THE ISSUE
Entitlement to waiver of recovery of an overpayment of
compensation benefits in the calculated amount of $16,600, to
include the issue of the validity of the debt.
REPRESENTATION
Appellant represented by: The American Legion
ATTORNEY FOR THE BOARD
W. Sampson, Counsel
INTRODUCTION
The veteran served on active duty from June 1967 to May 1970.
This matter comes to the Board of Veterans' Appeals (Board)
from a March 2002 decision of the Committee on Waivers and
Compromises (Committee) at the Department of Veterans Affairs
(VA) Regional Office (RO) in Houston, Texas, which determined
that the overpayment of compensation benefits in the
calculated amount of $16,600 was properly created, then
denied waiver of recovery of that overpayment.
The Board notes that the $16,600 overpayment assessed in this
case has already been recouped in full. However, in
accordance with Franklin v. Brown, 5 Vet. App. 190, 193
(1993), the Board will consider waiver of the entire
overpayment. See 38 C.F.R. § 1.967 (if waiver is granted for
debt that has been collected, the waived amount will be
refunded).
FINDINGS OF FACT
1. In March 2000, the veteran filed a claim for VA
compensation benefits indicating that he was in receipt of
military retirement pay.
2. In September 2001, the veteran was notified of an award
of VA compensation benefits, effective April 2000; a check
was issued for retro benefits covering a period during which
the veteran was also in receipt of retired military pay; the
veteran negotiated the check.
3. In December 2001, the veteran's award was corrected for
his military retirement benefits, creating an overpayment in
the amount of $16,600.
4. In December 2001, dependent's benefits were added to the
veteran's award, and a deduction was made from the retro
award of benefits, resulting in a remaining debt of $879
which has since been collected from subsequent benefits.
5. The overpayment at issue was not created through fraud,
misrepresentation of a material fact, or bad faith on the
part of the veteran.
6. The veteran was equally at fault with VA in creating the
debt at issue and failure to recover the overpaid benefits
would result in unfair gain to him; these elements outweigh
any other considerations with regard to equity and good
conscience.
CONCLUSIONS OF LAW
1. The overpayment of compensation benefits in the
calculated amount of $16,600 is a valid indebtedness. 38
U.S.C.A. § 5112(b) (West 2002); 38 C.F.R. §§ 3.500, 3.501
(2005).
2. Recovery of the compensation overpayment in the
calculated amount of $16,600 does not violate the principles
of equity and good conscience. 38 U.S.C.A. §§ 5107, 5302
(West 2002); 38 C.F.R. §§ 1.963(a), 1.965(a) (2005).
REASONS AND BASES FOR FINDINGS AND CONCLUSIONS
As a preliminary matter, the Board notes that the United
States Court of Appeals for Veterans Claims (Court) has held
that the notice and duty-to-assist provisions of the Veterans
Claims Assistance Act of 2000 (VCAA) pertain to chapter 51 of
title 38, U.S. Code, and not to the statute at issue in this
appeal -- chapter 53 of title 38, which contains its own
notice provisions. Thus, the Court held that VCAA does not
apply in waiver cases. See Lueras v. Principi, 18 Vet. App.
435 (2004); see also Barger v. Principi, 16 Vet. App. 132
(2002).
Factual Background
In March 2000, the veteran submitted an application for
service connected compensation benefits. He indicated on the
application form that he was receiving retirement pay from
the armed forces. In September 2001, service connection was
granted for post-traumatic stress disorder (PTSD) and
Hepatitis A. A 70 percent total evaluation was assigned
effective April 1, 2000 and a check issued for retro benefits
from that date. Payment records show that the check was
dated September 15, 2001 and paid September 24, 2001.
On September 25, 2001, the veteran submitted a Declaration of
Status of Dependents. On October 2001, the RO contacted the
Defense Finance Accounting Service (DFAS) to verify the
veteran's retirement pay and the veteran was informed in a
letter of that same date that VA neglected to withhold his
military retirement pay from his compensation award. He was
also informed that he was not allowed to received full
military retired pay and full VA compensation at the same
time.
In October 2001, the veteran submitted a Declaration of
Status of Dependents. On December 17, 2002, the veteran's
award was corrected and an adjustment made for his retired
military pay creating the original debt of $16,600. On
December 27, 2001, another award was processed to add his
nineteen dependents. The bulk of the veteran's debt was
satisfied from retro benefits as a result of this award, and
the debt was adjusted to the remaining $879 which was
subsequently collected from withholding of subsequent
payments.
In January 2002, the veteran filed a claim for a waiver of
the full $16,600 debt. He claimed that in his original
application he notified VA that he was receiving military
retired pay, and therefore any overpayment was entirely the
fault of VA. He also submitted a Financial Status Report
showing that he was a retired pastor, with average monthly
net income of $4,662 and average monthly expenses of $10,655.
His assets included $30,000 cash in the bank, three cars, and
two houses worth a total of $151,739.
In a March 2002 decision, the Committee denied the veteran's
request for a waiver of recovery of the $16,600 debt. With
respect to how the debt was created, the Committee noted that
the original October 2001 award, which included retroactive
benefits from the April 2000 effective date, did not adjust
for the veteran's receipt of military pay since the effective
date of the award. This was corrected in December 2001
creating the original debt of $16,600. Shortly thereafter
his nineteen dependents were added to his award, and this
debt was reduced to $879. VA has since recouped this amount
through withholding of subsequent payments.
In its original decision, the Committee noted that the
veteran had not informed VA of his retirement pay, and only
after the original award did VA learn from the Department of
Defense that the veteran was in receipt of military retired
pay. The veteran replied in April 2002 that he clearly
marked on his original application for compensation that he
was receiving retired military pay and therefore he was not
at fault in the creation of the overpayment. In June 2002,
the Committee acknowledged that it was at fault in creating
the overpayment, but noted that the veteran knew he was being
paid erroneously when he accepted VA benefits and military
retired pay for the same period with no adjustment in
benefits and therefore the fault was equal between VA and the
veteran. However, the Committee added that there were other
factors in addition to fault which weighed against a waiver
including the fact that because the debt was recovered almost
entirely from retro benefits it did not cause financial
hardship to the veteran. The Committee also noted that the
veteran was unjustly enriched when he continued to accept and
negotiate monthly compensation benefits after he had been
notified of VA error, and there was no indication in the
record that the veteran relied on VA overpayment to his
detriment.
In appealing the Committee's decision, the veteran argued
that he had 15 children in a house with only three bedrooms
and was planning to use the money from the retro benefits to
add two more bedrooms and two baths to the house to "make
life easier for the children." Regarding the receipt of the
first check from VA, he stated that return of the check back
to the VA would only have confused them, from what he had
heard, and it would have been a real problem to straighten
out. He complained that the waiver was being denied because
all the fault had been placed on him, even though VA was at
fault.
Analysis
A. Validity of the Debt.
The Court has held that the issue of the validity of a debt
is a threshold determination which must be made prior to a
decision on a request for waiver of the indebtedness. See
Schaper v. Derwinski, 1 Vet. App. 430 (1991); see also VA
O.G.C. Prec. Op. No. 6-98, published at 63 Fed. Reg. 31,264
(1998).
VA law and regulations currently provide that a veteran is
prohibited from receiving military retirement pay
concurrently with benefits payable under laws administered by
VA. 38 U.S.C.A. §§ 5304(a), 5305; 38 C.F.R. §§ 3.700, 3.750
(a-c).
Specifically, the provisions of 38 C.F.R. § 3.750 currently
provide that:
(a) General. Except as provided in
paragraphs (c) and (d) of this section
and § 3.751, any person entitled to
receive retirement pay based on service
as a member of the Armed Forces .... may
not receive such pay concurrently with
benefits payable under laws administered
by the Department of Veterans Affairs.
The term "retirement pay" includes
retired pay and retainer pay.
(b) Election. A veteran entitled to
retirement pay or compensation may elect
which of the benefits he or she desires
to receive. An election of retirement
pay does not bar him or her from making a
subsequent election of the other benefit
to which he or she is entitled.
(c) Waiver. A person specified in
paragraph (a) of this section may receive
compensation upon filing with the service
department concerned a waiver of so much
of his (or her) retirement pay as is
equal in amount to the compensation to
which he (or she) is entitled. In the
absence of a specific statement to the
contrary, the filing of an application
for compensation by a veteran entitled to
retirement pay constitutes such a waiver.
See 38 C.F.R. §§ 3.700, 3.750 (a-c) (2005).
In this case, the RO improperly payed the veteran the full
amount of his VA compensation benefits without a deduction
for his retired military pay, but shortly thereafter made a
correction resulting in an overpayment in the amount of
$16,600. While most of this overpayment was almost
immediately recouped through a deduction from his following
award for dependent benefits, the balance of $879 was also
repaid from a deduction of a subsequent payment. Thus, the
RO properly adjusted the veteran's benefits to account for
his receipt of retired military pay.
The veteran has not contested the fact that he received this
income, nor the amount received. Since the record does not
show that the RO committed either factual or legal error in
computing his annual countable income or the overpayment at
issue here, the Board is satisfied that the $16,600
compensation overpayment was properly calculated. Schaper, 1
Vet. App. at 434.
The Board notes that the veteran claims that he was not at
fault in the creation of this debt. Thus, the Board has
considered the concept of sole administrative error.
Under 38 U.S.C. § 5112(b)(10), the effective date of a
reduction or discontinuance of compensation by reason of an
erroneous award based solely on administrative error or error
in judgment shall be the date of last payment. See also 38
C.F.R. § 3.500(b)(2) (2005). As the Court noted, "[s]tated
another way, when an overpayment has been made by reason of
an erroneous award based solely on administrative error, the
reduction of that award cannot be made retroactive to form an
overpayment debt owed to VA from the recipient of the
erroneous award." Erickson v. West, 13 Vet. App. 495, 499
(2000).
Sole administrative error, however, may be found to occur in
cases where the veteran neither had knowledge of nor should
have been aware of the erroneous award. Further, such error
contemplates that neither the veteran's actions nor his
failure to act contributed to payment pursuant to an
erroneous award. 38 U.S.C.A. § 5112(b)(10) (West 2002); 38
C.F.R. § 3.500(b)(2) (2005).
In this case, the evidence shows that the veteran did not
immediately notify VA of the receipt of a check in error, but
negotiated the check, a fact he admitted to by explaining
that he had been told that returning the check back to VA
would have "only confused them" and created more of a
problem. Further, he argues that he had never been given
written instructions concerning the receipt of military
retired pay and VA compensation. However, the fact that the
veteran is prohibited from receiving military retirement pay
concurrently with VA benefits is a matter of law. 38
U.S.C.A. §§ 5304(a), 5305; 38 C.F.R. §§ 3.700, 3.750 (a-c).
The Court, citing to an opinion from the United States
Supreme Court, has held that everyone dealing with the
Government is charged with knowledge of Federal statute and
agency regulations. Morris v. Derwinski, 1 Vet. App. 260
(1991). Furthermore, the VA is under no legal obligation to
individually notify every potential claimant of his or her
possible entitlement to VA benefits. Lyman v. Brown, 5 Vet.
App. 194 (1993); Hill v. Derwinski, 2 Vet. App. 451 (1991).
Thus, because the veteran negotiated a check for VA payments
made contrary to the law, rather than returning the check,
his failure to act produced the overpayment. Indeed, VA took
prompt action to correct the erroneous payment through an
adjustment in the veteran's subsequent dependent award. In
view of the foregoing, the Board must find that the
overpayment at issue in this case was not due to sole
administrative error. 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. §
3.500(b)(2).
For the reasons set forth above, the Board finds that the
overpayment at issue in this case was properly created and is
a valid debt. Narron v. West, 13 Vet. App. 223 (1999).
B. Waiver of the Debt.
Initially, the Board concludes that the veteran timely
applied for waiver of recovery of the $16,600 overpayment of
compensation benefits, as his request was clearly made within
180 days following notification of the indebtedness. Thus,
he meets the basic eligibility requirements for a waiver of
recovery of this VA indebtedness, and his request must be
considered on the merits. 38 U.S.C.A. § 5302(a); 38 C.F.R. §
1.963 (2005).
The next issue for consideration is whether recovery of the
$16,600 overpayment at issue in this case should be waived.
In that regard, recovery of overpayment of any benefits made
under laws administered by the VA shall be waived if there is
no indication of fraud, misrepresentation, or bad faith on
the part of the person or persons having an interest in
obtaining the waiver and recovery of the indebtedness from
the payee who received such benefits would be against equity
and good conscience. 38 U.S.C.A. § 5302(c); 38 C.F.R. §§
1.963(a), 1.965(b).
In other words, any indication that a claimant committed
fraud, misrepresentation of a material fact, or bad faith in
connection with his receipt of VA benefits precludes the
Board from granting a waiver of recovery of the overpayment.
This parallels the "clean hands" doctrine familiar in equity
cases; only if a veteran is free from all taint of fraud in
connection with his claim for benefits may waiver on account
of "equity and good conscience" be considered. See Farless
v. Derwinski, 2 Vet. App. 555 (1992).
In this case, the Committee has determined that the veteran
did not exhibit fraud, misrepresentation or bad faith in the
creation of the instant overpayment. Given the facts of this
case, the Board will not disturb the Committee's findings.
Thus, the next issue to be addressed is whether a collection
of the debt from the veteran would be contrary to the
principles of equity and good conscience.
The applicable regulation provides that the standard of
"equity and good conscience" will be applied when the facts
and circumstances in a particular case indicate the need for
reasonableness and moderation in the exercise of the
Government's rights. 38 C.F.R. § 1.965(a) (2005). In such a
determination, consideration will be given to six elements
which include the degree of fault of the debtor; a balancing
of fault between the debtor and VA; whether recovery of the
overpayment would cause undue financial hardship to the
debtor, or result in unjust enrichment; and whether repayment
of the debt would defeat the purpose for which it was
intended. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. § 1.965
(2005).
In considering these factors, the Board initially finds, as
noted above, that the veteran was at fault in negotiating the
check from the VA. Because he is charged with knowledge of
the law, and it is against the law to accept a check for VA
compensation for a period for which he was also receiving
retired military pay, he contributed to creating the
overpayment in the amount of $16,600.
The second element concerns "balancing of faults." 38 C.F.R.
§ 1.965(a)(2) (2005). This element requires weighing the
fault of the debtor against the fault of VA. In that regard,
it is clear that the veteran never would have received the
check he negotiated creating the debt, had VA simply made the
offset for his military retirement pay in the first place, a
fact that VA was made aware of in the veteran's initial
application for benefits. The Board finds therefore that VA
bears equal fault in the creation of this debt, although VA
took prompt action to correct the overpayment through a
deduction in the veteran's subsequent award.
The next element to be considered regards "undue hardship,"
described as "[w]hether collection would deprive debtor or
family of basic necessities." 38 C.F.R. § 1.965(a)(3)
(2004). In this respect, according to his report, the
veteran's monthly expenses exceed his monthly income.
However, since the bulk of the $16,600 debt was almost
immediately recouped as a result of a deduction of the
veteran's subsequent award for dependent benefits, there was
no opportunity for any hardship to result with regard to this
amount. The remaining $879, since recouped, had minimal if
any impact on the veteran's ability to provide basic
necessities for his family as his financial status report
showed that he owned 2 houses, and had $30,000 cash in the
bank.
The next element to be considered concerns whether recovery
of the overpayment at issue would defeat the purpose for
which the benefits were intended. 38 C.F.R. § 1.965(a)(4)
(2005). As dual entitlement to compensation and military
retirement benefits is specifically precluded by the law,
recovery of the overpayment would not defeat the purpose of
the benefits originally authorized.
The fifth element involves "unjust enrichment," i.e., the
concept that failure to make restitution would result in
unfair gain to the debtor. 38 C.F.R. § 1.965(a)(5) (2005).
In this case, the veteran clearly received additional VA
benefits to which he was not legally entitled. Waiver of
this debt would therefore result in a windfall and produce
unfair gain to the veteran. The failure of the Government to
insist on its right to repayment of this debt would result in
the veteran's unjust enrichment at the expense of the
taxpayer, and it would negatively impact other VA
beneficiaries as resources for their care are certainly not
unlimited.
The final element to be considered is whether reliance on VA
benefits resulted in the veteran relinquishing a valuable
right or incurring a legal obligation. 38 C.F.R. §
1.965(a)(6) (2005). The veteran has not claimed that he
relinquished any right or incurred any legal obligation in
reliance on receipt of VA benefits, nor is there any evidence
that he did so.
After carefully weighing all relevant factors set forth
above, the Board finds that recovery of the overpayment of
$16,600 is not against the principles of equity and good
conscience. For the reasons indicated above, the Board finds
that the significant fault on the part of the veteran, as
well as the unjust enrichment which would accrue from a
waiver, overwhelmingly outweigh any element tending to
support a waiver of recovery of the overpayment in this case.
As a matter of equity, his request for waiver must be denied.
38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.962, 1.963.
(CONTINUED ON NEXT PAGE)
ORDER
Waiver of recovery of the overpayment of compensation
benefits in the calculated amount of $16,600 is denied.
____________________________________________
JEFF MARTIN
Veterans Law Judge, Board of Veterans' Appeals